Income Taxes

The reconciliation of the provision for income taxes to the amount computed by applying the U.S. federal statutory tax rate to earnings before income taxes is as follows:



	2017			2016			2015
Earnings before income taxes:
Domestic	$	77,007		$	82,848		$	78,074
Foreign	104,704			90,012			105,760
Total	$	181,711		$	172,860		$	183,834
Federal statutory income tax rate	35.0		%	35.0		%	35.0		%
Increase (decrease) in income taxes resulting from:
R&D and foreign tax credits	(3.8		)%	(30.6		)%	(2.7		)%
Divestiture impacts	(3.2		)%	—		%	—		%
Foreign tax rates	(2.4		)%	(2.7		)%	(4.8		)%
Equity-based compensation	(1.2		)%	—		%	—		%
Export and manufacturing incentives	(0.9		)%	(1.0		)%	(0.7		)%
Change in valuation allowance for deferred taxes	(0.4		)%	0.9		%	1.1		%
Change in enacted tax rates	—		%	(0.9		)%	(0.3		)%
Repatriated earnings	—		%	26.8		%	—		%
State taxes, net of federal benefit	0.4		%	0.5		%	0.8		%
Other	(0.8		)%	0.5		%	(0.1		)%
Effective income tax rate	22.7		%	28.5		%	28.3		%

At September 30, 2017, foreign tax benefit carryforwards total $15,300. Domestic benefit carryforwards representing state tax losses total $15,856. We also have $3,388 of state tax credit carryforwards. Some of these tax benefit carryforwards do not expire and can be used to reduce current taxes otherwise due on future earnings of those subsidiaries. The change in the valuation allowance relates to tax benefit carryforwards reflecting recent and projected financial performance, tax planning strategies and statutory tax carryforward periods.

During 2016, we repatriated $90,937 of earnings from various foreign subsidiaries and the tax expense was completely offset by foreign tax credits.

No provision has been made for U.S. federal or foreign taxes on that portion of certain foreign subsidiaries’ undistributed earnings ($923,602 at September 30, 2017) considered to be permanently reinvested. It is not practicable to determine the amount of tax that would be payable if these amounts were repatriated to the U.S.

The components of income taxes are as follows:



	2017			2016			2015
Current:
Federal	$	6,259		$	12,812		$	12,065
Foreign	24,162			29,794			25,844
State	122			2,373			1,051
Total current	30,543			44,979			38,960
Deferred:
Federal	11,624			10,078			10,800
Foreign	(1,986		)	(4,734		)	882
State	1,120			(1,096		)	1,309
Total deferred	10,758			4,248			12,991
Income taxes	$	41,301		$	49,227		$	51,951

Realization of deferred tax assets is dependent, in part, upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making its assessment of the recoverability of deferred tax assets.

The tax effects of temporary differences that generated deferred tax assets and liabilities are as follows:



	September 30, 2017			October 1, 2016
Deferred tax assets:
Benefit accruals	$	204,017		$	237,261
Inventory reserves	33,879			33,950
Tax benefit carryforwards	9,598			17,349
Contract loss reserves not currently deductible	15,994			10,931
Other accrued expenses	17,689			17,669
Total gross deferred tax assets	281,177			317,160
Less valuation allowance	(4,775		)	(10,938		)
Total net deferred tax assets	$	276,402		$	306,222
Deferred tax liabilities:
Differences in bases and depreciation of property, plant and equipment	$	169,562		$	163,977
Pension	93,602			77,471
Total gross deferred tax liabilities	263,164			241,448
Net deferred tax assets	$	13,238		$	64,774

Deferred tax assets and liabilities are reported in separate captions on the consolidated balance sheets.

We have unrecognized tax benefits which, if ultimately recognized, will reduce our annual effective tax rate. A reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:



	September 30, 2017			October 1, 2016
Balance at beginning of year	$	498		$	1,184
Reductions as a result of lapse of statute of limitations	(498		)	(686		)
Balance at end of year	$	—		$	498

We are subject to income taxes in the U.S. and in various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require the application of significant judgment. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities in significant jurisdictions for years before 2014. The statute of limitations in several jurisdictions will expire in the next twelve months and we will have no unrecognized tax benefits recognized if the statute of limitations expires without the relevant taxing authority examining the applicable returns.

We record interest and penalties related to unrecognized tax benefits in income tax expense. We had accrued interest and penalties of $567 and $469 at September 30, 2017 and October 1, 2016, respectively. We expensed interest of $106 and $276 for 2017 and 2016, respectively.